updated 06:40 am EDT, Thu April 26, 2012

Nintendo struggles with gaming-first hardware

Nintendo has posted (pdf) its first annual loss turning in a result around $458 million into the red. The downturn has been blamed on the rise of mobile gaming on smartphones, and a lackluster holiday quarter where its aging Wii console and dramatic price reduction on the 3DS blew a hole in its finances. The said that it hopes to turn its fortunes around in the fiscal year ending March 31, 2013 by launching its next-gen Wii U console and by starting to sell its 3DS for a profit, where it is currently selling it at a loss.

Nintendo sales for the fiscal year ending March 31 2012 were down sharply at 36.2 percent against its previous fiscal year ending March 31 2011. Although it has been taking a loss on each 3DS it is selling, the price cut helped to drive sales of the handheld console to 13.53 million units with gamers also purchasing 36 million 3DS games. However, its Wii console struggled by comparison, selling 9.84 million units as its novelty has worn off with the Xbox Kinect and PlayStation Move attracting both serious and casual gamers.

Speaking to Reuters, David Gibson an analyst for Macquarie in Tokyo said, 'They have been beaten by smartphones and tablets, in particular, for consumers spending and, more importantly, time.'

However, while analysts are skeptical about the ability of the Wii U to address the rapidly changing gaming landscape, Nintendo is in a strong financial position overall. At the height of the success of the Wii and its earlier handheld gaming consoles, it managed to amass a $14 billion war chest giving it room for maneuver should its immediate gaming centric-only hardware strategy continues to falter.